Taxpayers Who Rely on IRS “Frequently Asked Questions” (FAQs) Having Penalties Asserted on Audit!

The National Taxpayer Advocate (NTA) released a blogpost, on July 7, identifying an important problem for taxpayers who rely on IRS “Frequently Asked Questions” (FAQs).

We here at Marini & Associates, PA came across this problem during the numerous years that FAQs were posted for the oh VD programs. We determined and recommend to all taxpayers to print out the FAQs which the relying on for the preparation of various tax returns, because in later years when you need to defend the taxpayer's position, don't be surprised that the FAQs have disappeared or have changed dramatically.

The NTA goes on to provide in their blog post that in the course of preparing your federal income tax return, you are wondering whether a particular expense is deductible. You go to the IRS website and find a “Frequently Asked Question” (FAQ) that’s directly on point. Good news: The IRS says the expense is deductible. So you deduct it. The next year, the IRS audits your return. The examining agent informs you the IRS changed its position after you filed your return. 

The Examining Agent Not Only Denies The Deduction, But He Imposes A 20 Percent Accuracy-related Penalty As Well.
You Go Back To IRS.gov To Try To Find The FAQ
You Relied On, But It’s Gone.

If the Taxpayer Bill of Rights is to be given meaning, this scenario violates “The Right to Informed” and “The Right to a Fair and Just Tax System.” It is neither fair nor reasonable for the government to impose a penalty against a taxpayer who follows information the government provides on its website.

As tax professionals know well, some forms of administrative guidance are more authoritative than others. Regulations are at the top of the hierarchy, because they go through a notice-and-comment process and are considered binding on the government and taxpayers alike. Other forms of guidance that are published in the Internal Revenue Bulletin (IRB) like revenue rulings, revenue procedures, and notices generally go through an extensive Treasury and IRS review process and are considered binding on the government (but not on taxpayers). According to a statement included in each IRB, “Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents.” Below IRB guidance are IRS press releases, FAQs, and well-reasoned arguments, which may be found in Chief Counsel Advice and Private Letter Rulings that have been disclosed to the public.

Treasury Regulation § 1.6662-4 says that taxpayers may avoid the accuracy-related penalty for substantial understatements of income tax if there is “substantial authority” for a return position, and reliance on “Internal Revenue Service information or press releases” is considered to meet that standard. With some exceptions, FAQs are not published in the IRB, and the scope of the term “Internal Revenue Service information” is not defined in regulations. 

It may seem obvious that FAQs posted on the IRS website constitute “Internal Revenue Service information,” but the IRS has declined to concede that point. (See Internal Revenue Manual 4.10.7.2.4 (Jan. 10, 2018) (“FAQs that appear on IRS.gov but that have not been published in the Bulletin are not legal authority and should not be used to sustain a position unless the items (e.g., FAQs) explicitly indicate otherwise or the IRS indicates otherwise.”)

There is a legitimate reason why the IRS uses FAQs and doesn’t want them to be accorded the same level of authority as published IRB guidance. The agency seeks to strike a balance between precision and timeliness. The published guidance process is thorough and time-consuming. Treasury and the IRS don’t have the bandwidth to address all legal issues that arise through the published guidance process, and that process is not well-suited to providing guidance quickly. FAQs fill the timeliness gap.

Because FAQs aren’t subject to thorough review, Treasury and the IRS may later decide some of them are wrong and change them. That is reasonable.

But what about taxpayers who followed an FAQ and now find that: (i) the IRS is taking the opposite position on audit; (ii) the IRS is imposing a penalty on the taxpayer for taking the position the FAQ had advised; and (iii) the taxpayer can’t locate the original FAQ because the IRS has changed it and removed the initial FAQ from its website?

On some FAQ pages, the IRS provides this or a similar disclaimer: “This FAQ is not included in the Internal Revenue Bulletin, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case.” On other FAQ pages, there is no such disclaimer. 

Either way, it is unreasonable to say taxpayers may not “rely” on FAQs. The sole purpose for posting FAQs and similar information on IRS.gov is to help taxpayers file accurate returns. Why should taxpayers even bother reading and following FAQs if they can’t rely on them and if the IRS can change its position at any time and assess both tax and penalties? At a minimum, the IRS should treat FAQs as “Internal Revenue Service information” for purposes of determining whether a taxpayer had “substantial authority” for taking a return position. The fact that the disclaimer itself refers to FAQs as providing “information” is revealing. When the “Internal Revenue Service” posts “information” on its website, it is hard to see why the information should be characterized as anything other than “Internal Revenue Service information.”

To protect the rights of taxpayers who follow FAQs, the TAS maked the following recommendations:

1. The IRS should continue to use FAQs to provide timely guidance to taxpayers where appropriate. We acknowledge that quick answers will sometimes be changed upon more thorough review. Therefore, it is reasonable for examining agents to retain the authority in limited cases to challenge taxpayer return positions if an FAQ has been changed, but when that situation arises, examining agents should be required to consider the previously issued FAQ.
   
   
2. For penalty relief purposes, the Treasury Department and the IRS should clarify that the information presented in FAQs constitutes “Internal Revenue Service information” under Treasury Regulation § 1.6662-4(d)(3)(iii). Further, the IRS should never assess a penalty against a taxpayer for taking a position consistent with an FAQ posted on the IRS website at the end of a taxpayer’s taxable year or at the time of return filing unless the IRS has convincing evidence the taxpayer knew the FAQ had been changed.
   
   
3. The IRS should include the versions and dates of each FAQ on its website or create an archive of obsolete or modified FAQs, including applicable dates, so that taxpayers can locate an FAQ that was in effect at the time they filed their returns. Regardless of the level of deference a taxpayer’s reliance on an FAQ ultimately receives, it is a basic requirement of government transparency that a taxpayer be able to locate and cite the FAQ that appeared on IRS.gov at the time the taxpayer filed a return. An FAQ should not just “disappear” if the IRS decides to change it or remove it as current guidance.

In sum the TAS' position is that FAQs play a useful role in providing timely guidance to taxpayers and tax professionals, and this has been particularly true in connection with COVID-19 relief provisions. Because of the haste with which FAQs are sometimes posted, it is understandable that the IRS would want to ensure it can change FAQs without being permanently bound to the position it initially expressed. But taxpayers have the right to expect transparency and fair dealing from their government. If a taxpayer takes the time to visit a government website to locate information to help comply with tax obligations, the taxpayer should be rewarded for trying to do the right thing – not penalized.

Have an IRS Tax Problem?

 

 

Contact the Tax Lawyers at
Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

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Toll Free at 888-8TaxAid (888) 882-9243

IRS Is Back, Fully Staffed & Resuming Issuing Tax Notices, Tax Liens & Tax Liens!

On May 20, 2020 we posted IRS Is Back! ... They Are Bring Back Workers In 3 States Starting June 1! where we discussed that the Internal Revenue Service is recalled about 46,000 of its employees furloughed by the government shutdown, nearly 60 percent of its workforce; with the IRS being fully staffed on or before July 15, 2020.

The IRS has reopen facilities in remaining states on July 13. However, the IRS is putting an emphasis on telework and plans to continue to encourage it, where possible, for the foreseeable future to ensure social distancing. 

Here's a closer look at some of what's open or opening soon:

Telephone Lines. Automated phone lines remain available. But if you want to talk to a real person, including the EIP phone line for those who received an EIP letter (Notice 1444), you should expect to wait - though phone lines are open. If you're looking for an update for your regular tax refund, you can call the automated number at 1-800-829-1954. And before you dial: this line has no information about the status of your stimulus checks (Economic Impact Payments).

Balance Due Notices. The IRS was unable to mail some previously printed balance due notices as a result of office closures. As IRS operations continue to reopen, these notices will be delivered to taxpayers in the next few weeks. Given the time it would take to reprogram IRS systems, and generate updated notices, some of the notices taxpayers will receive have due dates that have already passed. However, each notice will include an insert confirming that the due dates printed on the notices have been extended. I can confirm that the inserts are going out (several of my clients have received them).

Practitioner Priority Service (PPS). While many of my colleagues have been rejoicing about the reopening of the Practitioner Priority Service (PPS) line, but I've still not been able to talk to a representative. That may be because the PPS line is open but has limited staffing.

Centralized Authorization File (CAF). The IRS says that it's processing some Centralized authorization file (CAF), requests on a limited basis. However, we have not spoken with any tax professionals who have managed to get through. According to the IRS, only the CAF unit at Ogden is operational at this time, which could explain this issues, as Ogden services mostly west coast taxpayers.

Web services. IRS.gov remains open. That means:

• Practitioners with e-Services accounts and client authorization can access the Transcript Delivery System (TDS) to obtain taxpayer transcripts. However, there is no mechanism for automatically registering a Form 2848 that has not previously been processed; you'll have to call PPS to get those transcripts.
• Taxpayers can also access "Where's My Refund?" and "Get Transcript Online."
• Taxpayers can check the status of their Economic Impact Payment at Get My Payment, their refund status at Where's My Refund? or obtain a tax transcript at Get Transcript Online. 
• Taxpayers also can make tax payments through Direct Pay.
• Taxpayers who previously have been issued an Identity Protection PIN but lost it must use the Get an IP PIN tool to retrieve their numbers. 

Independent Office of Appeals. Appeals employees are continuing to work their cases. Appeals is not currently holding in-person conferences with taxpayers, but conferences may be held over the telephone or by videoconference. I can confirm that this is happening: I had an appeals conference by phone this week.

Taxpayer Advocate Service (TAS) Local Numbers. TAS is open, in theory, to receive phone calls at the local phone numbers. We have had success with reaching TAS and getting positive results from TAS, through out this IRS shut down.

Paper Tax Returns: The IRS is experiencing delays in processing paper tax returns due to limited staffing, but they are beginning to process paper returns. You can read more here.

Electronic Lien Processing. The IRS is processing all electronically submitted lien certificate applications normally and assigning them within 10 days. The IRS requests that taxpayers use the E-Fax line for our ACR site (844-201-8382) for certificates such as discharge of property from the federal tax lien; withdrawal of the notice of federal tax lien; and subordination of the federal tax lien.

Tax Court. Okay, it's not technically IRS, but it's related. While the Tax Court building remains closed to visitors (and all trial sessions through June 30, 2020, are canceled), Court proceedings are currently be conducted remotely. Additionally, the IRS has issued guidance (Notice 2020-23) that extends the deadline to file a Tax Court petition and a notice of appeal from a Tax Court decision. If the statutory deadline to file falls on or after April 1, 2020, and before July 15, 2020, the filing deadline is now extended to July 15, 2020.

And here's a look at what's not open:

Services by mail. The "Get Transcript by Mail" is not operational since the offices that print and mail the transcripts are closed.

Most other mail processes. The IRS is receiving and storing mail, but as noted, there is a significant backlog so expect delays. Officially they say, "our mail processing functions have been scaled back to comply with social distancing recommendations." In some cases, correspondence sent to IRS offices may be returned to the taxpayer if that office is closed, and no one is available to accept them.  

Most phone lines. As noted earlier, some specific phone lines have resumed service, but most have not.

U.S. Residency Certification: The Philadelphia Accounts Management Campus is closed, so the U.S. Residency Certification Program's processing is temporarily suspended. 

Taxpayer Advocate Service (TAS) Toll-Free Number and Walk-in Services. The centralized toll-free number is unavailable until further notice. Additionally, there are no walk-in services. A message on the website reads, "Taxpayer Advocate Service (TAS) employees are teleworking, sheltering at home and working to serve our taxpayers. We are experiencing delays and interruptions in working cases due to IRS services being limited. These limited services are also causing a high call volume to our organization resulting in delays in our response times. Please be patient."

Paper Lien Processing. The IRS is not currently processing lien certificate applications mailed to the Advisory Consolidated Receipts (ACR) site in Florence, Kentucky. The IRS is working to restore mail service. 

Have an IRS Tax Problem?

 

 

Contact the Tax Lawyers at
Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

Source:

Forbes

Use our tax settlement calculator to estimate potential relief available. We provide Immediate IRS Help to Stop Wage Garnishment and End Your Tax Problems

Bermuda Schedules Beneficial Ownership Register to Go Public

Bermuda’s companies beneficial ownership register is to go public.

The island has kept records of the owners of companies for about 70 years, with the information only available to government authorities.

The Government said it would put forward legislation making the register accessible to the public by January 2023.

In doing so, Bermuda is following the lead of the UK Crown Dependencies, Jersey, Guernsey and the Isle of Man, and the Cayman Islands, all of which made similar commitments last year.

A government spokeswoman said: “Recognising the iIt'smportance of the provision of beneficial ownership information for the prevention and detection of domestic and cross-border crime, and in anticipation of the implementation of a global standard which Bermuda has similarly committed to meet once adopted, and in keeping with Bermuda’s previous commitments, the Government of Bermuda intends to make the companies central register of beneficial ownership information accessible to the public.”

“Accordingly, we have actively engaged with our global partners in respect of beneficial ownership and transparency.

“This announcement today underpins our commitment to ensure that Bermuda remains a jurisdiction of choice for quality and compliant business.”

Have Unreported Income?

 

 

Like Your Freedom?

 

 

Want to Know if the OVDP Program is Right for You? 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

Source:

The Royal Gazette

J5 - More Tax Date Exchanged in the Last 2 Yrs Than Previous 10 Yrs

On February 19, 2020 we posted J5 Tax Chiefs Closing The Net On Global Tax Evasion!, Where we discussed that leaders from five international tax organizations came together in Sydney, Australia, during the week of February 17, 2020 to review the J5’s progress in their fight against transnational tax crime and set priorities for the year ahead.

Now the J5 reflects on two-years pursuing global tax cheats. The J5 includes the Australian Taxation Office (ATO, the Canadian Revenue Agency (CRA), the Dutch Fiscal Information and Investigation Service (FIOD), Her Majesty’s Revenue and Customs (HMRC) from the UK and the Internal Revenue Service Criminal Investigation Division (IRS-CI) from the US.

During The Two Years Since The J5’s Inception, Hundreds Of Data Exchanges Between J5 Partner Agencies Have Occurred

 

With More Data Being Exchanged In The Past Year Than The Previous 10 Years Combined.

Since the inception of the organization, two J5 countries have hosted events known as “Challenges” aimed at developing operational collaboration. 

1. FIOD hosted the first J5 “Challenge” in Utrecht in 2018 and brought together leading data scientists, technology experts and investigators from all J5 countries in a coordinated push to track down those who make a living out of facilitating and enabling international tax crime.  
• The event identified, developed, and tested tools, platforms, techniques, and methods that contribute to the mission of the J5 focusing on identifying professional enablers facilitating offshore tax fraud. 
2. The following year, the U.S. hosted a second “Challenge” in Los Angeles and brought together investigators, cryptocurrency experts and data scientists in a coordinated push to track down individuals perpetrating tax crimes around the world.

Last week, a Romanian man was arrested in Germany and admitted to conspiring to engage in wire fraud and offering and selling unregistered securities in connection with his role in the BitClub Network, a cryptocurrency mining scheme worth at least $722 million. This plea was the first for a case under the J5 umbrella and stemmed from collaboration with the Netherlands during the “Challenge” in Los Angeles in 2019.

In addition to the group’s work with enablers and virtual currency, the J5 also focused on platforms that enable each country to share information in a more organized manner.  

• FCInet is one such platform that each country has invested in to further that goal.  
• FCInet is a decentralized virtual computer network that enables agencies to compare, analyse and exchange data anonymously. 
• It helps users to obtain the right information in real-time and enables agencies from different jurisdictions to work together while respecting each other’s local autonomy.  
• Organizations can jointly connect information, without needing to surrender data or control to a central database. FCInet doesn’t collect data, rather it connects data.

The Introduction Of Automatic Exchange of 
Financial Information Between Countries, 
Registers of Beneficial Ownership, Information 

 

From Worldwide Data Leaks And Improved Tax Enforcement Had Made Hiding Wealth Offshore Increasingly Difficult.

Experts from the J5 countries have seen indications that tax offenders are embracing ever more complex methods to conceal their wrongdoings, creating multiple mechanisms and structures that are split across jurisdictions, taking advantage of those areas that offer secrecy and regulatory benefits. With this information, the J5 finds itself continuously adapting to the latest criminal methods and changing behaviors to prioritize the collective operational activity to tackle this dynamic threat picture. 

 

Have Unreported Income?

 

 

Like Your Freedom?

 

 

Want to Know if the OVDP Program is Right for You? 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243



IRS Issues Final Regulations on Deduction for FDII and GILTI.

On July 9, 2020 the Internal Revenue Service announced in IR-2020-147 that it issued final regulations that provide guidance on deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income allowed to domestic corporations under the Internal Revenue Code.

These final regulations provide guidance on both the computation of the deductions available and the determination of FDII.

In addition, the guidance provides rules for the computation of FDII in the consolidated return context.

The guidance published today also finalizes the reporting rules requiring the filing of Form 8993, Section 250 Deduction for Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income.

• This document contains final regulations that provide guidance regarding the deduction for foreign-derived intangible income (FDII) and global intangible lowtaxed income (GILTI). 
• This document also contains final regulations coordinating the deduction for FDII and GILTI with other provisions in the Internal Revenue Code. 
• These regulations generally affect domestic corporations and individuals who elect to be subject to tax at corporate rates for purposes of inclusions under subpart F and GILTI.

Have an International Tax Problem?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Foreign Countries Searching For Taxpayers Using America as a Tax Haven

On May 30, 2018 we posted TheUs Is Now The 2nd Largest Tax Haven And Is Scheduled To Be Blacklisted By TheEu!, where we discussed that the U.S. is the world’s second-largest tax haven, behind Switzerland and just ahead of the Cayman Islands, according to a report released May 15, 2018. 

On May 21, 2019 we posted Another IRS Summons on Behalf of a Foreign Government, where we discussed that France, Norway and now Finland have successfully petitioned the U.S. District Court to authorize IRS summonses to uncover the identities of Finnish residents using U.S.-issued payment cards in Finland. The DOJ and IRS are these mutual legal assistance treaty (MLAT) requests under various U.S. Tax Treaties at the request of foreign governments.

Now according to Times.KY, it is the US' turn to be on the defensive. Other countries are using similar tools to those America once employed to reveal un-taxed money stashed by their own citizens in the world’s largest economy. 

After the US passed FATCA 2010 that required foreign financial firms to spill the beans on American clients, more than 100 other countries signed up to the “Common Reporting Standard” (CRS), and now swap tax-relevant financial information with each other.

America, however, did not join the CRS. Instead it shares information on the foreign clients of American banks under FATCA’s reciprocal provisions. But sharing is patchy; a lot of countries get nothing. Combine that with the high level of anonymity offered by American shell companies, and it is hardly surprising that America has become the destination of choice for many tax evaders. One tax expert reckons that “over 90% of assets avoiding the CRS have been herded into the USA”.

Other countries are now finding that there are legal tools at their disposal to information on their citizens who have assets in the US.

One Is The So-Called John Doe Summons

  

This American provision assists tax authorities going after “a particular person or ascertainable group or class of persons” whom they suspect of financial wrongdoing, but whose identities are unknown. If approved by a court, the summons forces banks to hand over names

Until now the biggest user of such summonses in tax cases has been America, which, for instance, used the procedure in 2008 to prise open Swiss bank secrecy. 

Other countries suffering tax leakage will be looking more closely at this procedure. Any of the 90 countries with a ratified bilateral tax treaty with America can use it, though some seem unaware of the option. By contrast, America has agreed to exchange information with only 47 countries under FATCA. 

It Could Help To Break Open Not Only Dodgy Bank Accounts But Also Trusts And Insurance Policies,
Which Are Also Commonly Used To Hide Capital.

There could still be obstacles, for instance if an account is owned by an entity rather than an individual. But banks issued with a summons are required to investigate who stands behind account-holding shell companies. Due-diligence rules designed to curb money-laundering and the financing of terrorism, issued by FinCEN, a federal agency, already require banks to know the identity of such “beneficial” owners (though not all seem to do so). A shell-cracking bill picking up momentum as it passes through Congress would also help improve corporate transparency. 

So don't be surprised if more countries take the John Doe route to discover their tax resident's assets which are located in the US. 

Have an International Tax Problem?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

 

 

 

Supreme Court Rules Trump's Tax Returns Are Subject to Subpoena!

The Supreme Court on Thursday, July 9, 2020 ruled that Manhattan's chief prosecutor can obtain President Trump's business records and tax returns and President Trump is not immune from New York’s subpoena, but prosecutor will not get documents now.

The high court ruled 7-2 in favor of Manhattan District Attorney Cyrus Vance, who is conducting a criminal investigation into the president's business dealings and hush-money payments made to two women who allegedly had affairs with the president years before he was elected. Justices Clarence Thomas and Samuel Alito dissented. 

"Two hundred years ago, a great jurist of our Court established that no citizen, not even the President, is categorically above the common duty to produce evidence when called upon in a criminal proceeding. We reaffirm that principle today and hold that the President is neither absolutely immune from state criminal subpoenas seeking his private papers nor entitled to a heightened standard of need," Chief Justice John Roberts wrote for the majority.

But SCOTUS blocked Congress from getting Trump financial records. The House subpoenas for President Trump’s financial documents will remain blocked the Supreme Court said, sending a controversial case back down to the lower court for further review.

This process will begin again. The district court will get briefings. They may hear evidence. That will be appealed to the second circuit court of appeals and then the losing party can go back to the Supreme Court. All of this will take a while, so it will be awhile before prosecutors get these documents. Furthermore, as we are in July and the election takes place in November, it seems unlikely that the actual documents will be turned over to the grand jury before November.

Have a Tax Problem?

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243

 

Sources:

CNN

CBS